India will face the full force of U.S. tariffs from August 1, with a 25% rate unchanged from April’s announcement, according to Bernstein analyst Venugopal Garre. Despite four months of negotiations, conditions for India have worsened. In April, India’s tariffs stood at 26%, lower than Vietnam’s 46% and Indonesia’s 32%. Now, Vietnam and Indonesia enjoy significantly reduced rates—20% and 19% respectively—while Japan pays just 15%.
India has secured no exemptions and could face further penalties over its crude oil and arms trade with Russia. The Russia-related penalty remains undefined, but Garre warns it could further weaken India’s competitive position. Hopes for a U.S.-India trade deal, which lingered into June, have now faded. “Even till last week, India was hopeful for 15% tariffs—lower than Indonesia’s,” Garre said, adding that unresolved issues around defense and Russia ties are straining relations.
President Trump’s recent remarks signal a cooling in U.S.-India relations, with the shift possibly linked to tensions around the India-Pakistan conflict. While the immediate macroeconomic impact is limited—services are excluded from tariffs, and U.S. merchandise exports account for just $85 billion of India’s $4 trillion GDP—the long-term effects could be serious.
Electronics exports, especially mobile phones, have surged nearly 40% in recent years to reach $30 billion in FY2024. Garre warns this growth could stall under higher tariffs, with auto parts and EMS sectors also at risk.
Whether this is a temporary setback or the start of a prolonged downturn in bilateral ties remains uncertain. “A trade deal is still possible, but unlikely to deliver a breakthrough amid current tensions,” Garre noted, calling 2025 “another year of missed opportunities.”